Crude oil prices climbed toward $68 a barrel on Thursday as Hurricane Rita closed in on Texas, raising fears it would hit key production facilities along the United States Gulf Coast that were largely untouched by Hurricane Katrina’s onslaught three weeks ago.
The category-five hurricane with 265kph winds is expected to strike Texas, the heart of US oil production, on Saturday. More than 1,3-million people in Texas and Louisiana — including hundreds of oil workers — have been ordered to evacuate.
”No question, prices are driven by Hurricane Rita,” said Energyintel analyst Sam Dale in Singapore. There are fears that the storm will force refinery closures, ”and if these facilities close it is going to reduce inventories”.
In Singapore, November front-month contracts on the New York Mercantile Exchange rose as much as 98 cents to $67,78 a barrel in electronic trade, before easing slight to $67,61. In New York trading, it rose 60 cents to close at $66,80 a barrel on Wednesday.
Oil prices are about 40% higher than a year ago. Nymex crude reached an all-time high of $70,85 a barrel on August 30 when Katrina made landfall in Louisiana, damaging and shutting down numerous oil refineries and other facilities.
Now Texas, which produces more than 25% of total US crude, is bracing for similar havoc from Rita.
Eighteen of its 26 refineries, with a combined distillation capacity of four million barrels daily, are located near the Gulf of Mexico. Dow Jones Newswires said at least eight refineries were expected to close shortly.
”Some of those refineries in Texas, they’re at sea level. It’s a table top, it floods every easily,” said Ed Silliere, vice-president of risk management at Energy Merchant LLC in New York.
The US Minerals Management Service said on Wednesday that 469 platforms in the Gulf were unstaffed, up sharply from 136 on Tuesday. More than 73% of oil production in the region was blocked, up from 58% on Tuesday.
In a sign of growing frustration over surging oil prices, the head of the US Energy Information Administration (EIA), Guy Caruso, slammed the Organisation of Petroleum Exporting Countries (Opec) for constraining production to keep prices high — days after the 11-member oil cartel pledged to make available an additional two million barrels daily to cope with high demand.
”Without question,” Caruso said on Wednesday when asked during a Senate commerce committee hearing whether Opec has contributed to soaring oil prices.
”Opec policy has been to constrain production and collude … Under the FTC [Federal Trade Commission] definition of collusion and price-fixing, yes,” he said. The EIA is the statistical and analytical wing of the US Department of Energy.
Opec, responsible for a third of global output, promised earlier this week to make available an additional two million barrels daily, but its members have also said the problem is not with the amount of crude available but with refining capacity.
Oil prices didn’t get much relief from the Department of Energy’s weekly report on Wednesday that US gasoline inventories rose by 3,4-million barrels to 195,4-million barrels in the week ended September 16.
Inventories of distillate fuels, which include heating oil, rose by 800 000 barrels to 134,1-million barrels, while crude inventories dropped by 300 000 barrels to 308,1-million, but are nearly 12% above year-ago levels.
In Nigeria, followers of a detained militia leader demonstrated in the oil city of Port Harcourt, vowing to destroy oil facilities and attack the army if he was not released.
”These kinds of political risk factors are very, very important to driving oil prices higher,” said Energyintel’s Dale. ”Nigeria is a big exporter to the US, and potential disruption is an obvious excuse for traders to bid higher.”
In other Nymex prices, natural gas continued its march upward, rising 59 cents to $13,19 per 1 000 cubic feet — making the key winter heating-fuel commodity more than 50% higher from the same period in 2004. Gasoline rose five cents to $2,1050 a gallon (3,8 litres) and heating oil moved three cents higher to $2,0690 a gallon. — Sapa-AP